23342 Federal Register / Vol. 76, No. 80 / Tuesday, April 26, 2011 / Notices 

1All entities that currently intend to rely on the 

order have been named as applicants. Any other 

entity that subsequently relies on the order will 

comply with the terms and conditions of the 

application. A Fund of Funds (as defined below) 

may rely on the order only to invest in Funds and 

Actively-Managed Funds (as defined below) and 

not in any other registered investment company. 

2Each Fund will comply with the disclosure 

requirements adopted by the Commission in 

Investment Company Act Release No. 28584 (Jan. 

13, 2009) before offering Shares. 

longer wish to receive it, or would like 

to be added to the distribution, please 

contact the Office of the Secretary, 

Washington, DC 20555 (301–415–1969), 

or send an e-mail to 

darlene.wright@nrc.gov. 

Dated: April 21, 2011. 

Rochelle C. Bavol, 

Policy Coordinator, Office of the Secretary. 

[FR Doc. 2011–10178 Filed 4–22–11; 4:15 pm] 

BILLING CODE 7590–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

29655; File No. 812–13669] 

Russell Investment Management 

Company, et al.; Notice of Application 

April 20, 2011. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice of an application for an 

order under section 6(c) of the 

Investment Company Act of 1940 (the 

‘‘Act’’) for an exemption from sections 

2(a)(32), 5(a)(1), 22(d), and 22(e) of the 

Act and rule 22c–1 under the Act, under 

sections 6(c) and 17(b) of the Act for an 

exemption from sections 17(a)(1) and 

17(a)(2) of the Act, and under section 

12(d)(1)(J) for an exemption from 

sections 12(d)(1)(A) and 12(d)(1)(B) of 

the Act. 

SUMMARY OF APPLICATION: Applicants 

request an order that would permit (a) 

series of certain open-end management 

investment companies to issue shares 

(‘‘Shares’’) redeemable in large 

aggregations only (‘‘Creation Units’’); (b) 

secondary market transactions in Shares 

to occur at negotiated market prices; (c) 

certain series to pay redemption 

proceeds, under certain circumstances, 

more than seven days after the tender of 

Shares for redemption; (d) certain 

affiliated persons of the series to deposit 

securities into, and receive securities 

from, the series in connection with the 

purchase and redemption of Creation 

Units; and (e) certain registered 

management investment companies and 

unit investment trusts outside of the 

same group of investment companies as 

the series to acquire Shares. 

APPLICANTS: Russell Investment 

Management Company (‘‘RIMCo’’), 

Russell Exchange Traded Funds Trust 

(‘‘Trust’’, formerly U.S. One Trust), 

Russell Financial Services, Inc. (‘‘RFS’’) 

and ALPS Distributors, Inc. (‘‘ALPS’’). 

FILING DATES: The application was filed 

on July 2, 2009, and amended on August 

31, 2009, January 22, 2010, November 

15, 2010, March 16, 2011, April 14, 

2011, and April 20, 2011. 

HEARING OR NOTIFICATION OF HEARING: An 

order granting the application will be 

issued unless the Commission orders a 

hearing. Interested persons may request 

a hearing by writing to the 

Commission’s Secretary and serving 

applicants with a copy of the request, 

personally or by mail. Hearing requests 

should be received by the Commission 

by 5:30 p.m. on May 13, 2011, and 

should be accompanied by proof of 

service on applicants, in the form of an 

affidavit, or for lawyers, a certificate of 

service. Hearing requests should state 

the nature of the writer’s interest, the 

reason for the request, and the issues 

contested. Persons who wish to be 

notified of a hearing may request 

notification by writing to the 

Commission’s Secretary. 

ADDRESSES: Secretary, Securities and 

Exchange Commission, 100 F Street, 

NE., Washington, DC 20549–1090; 

Applicants, 1301 Second Avenue, 18th 

Floor, Seattle, WA 98101. 

FOR FURTHER INFORMATION CONTACT: 

Laura L. Solomon, Senior Counsel at 

(202) 551–6915, or Jennifer L. Sawin, 

Branch Chief, at (202) 551–6821 

(Division of Investment Management, 

Office of Investment Company 

Regulation). 

SUPPLEMENTARY INFORMATION: The 

following is a summary of the 

application. The complete application 

may be obtained via the Commission’s 

Web site by searching for the file 

number, or an applicant using the 

Company name box, at http:// 

www.sec.gov/search/search.htm or by 

calling (202) 551–8090. 

Applicants’ Representations: 

1. The Trust is organized as a 

Delaware statutory trust and is 

registered as an open-end management 

investment company under the Act. The 

Trust initially will offer series described 

in Exhibit C to the application (‘‘Initial 

Funds’’) whose performance will 

correspond generally to the total return 

of a specified index consisting solely of 

equity and/or fixed income securities 

(‘‘Underlying Index’’ or ‘‘Index’’). 

2. Applicants request that the order 

apply to the Initial Funds and any 

additional series of the Trust and any 

other open-end management investment 

companies or series thereof, that may be 

created in the future and that track a 

specified equity and/or fixed income 

securities Underlying Index (‘‘Future 

Funds’’).1 Any Future Fund will be (a) 

advised by RIMCo or an entity 

controlling, controlled by, or under 

common control with RIMCo 

(‘‘Adviser’’), and (b) comply with the 

terms and conditions of the application. 

The Initial Funds and Future Funds, 

together, are the ‘‘Funds’’.2

3. RIMCo is registered as an 

investment adviser under the 

Investment Advisers Act of 1940 (the 

‘‘Advisers Act’’), and will serve as 

investment adviser to the Initial Funds. 

Any investment adviser to Future Funds 

will be registered as an investment 

adviser under the Advisers Act. The 

Adviser is a wholly-owned subsidiary of 

Frank Russell Company d/b/a Russell 

Investments (‘‘Russell’’ or the ‘‘Index 

Provider’’) who may provide the 

Underlying Indexes for certain Funds. 

The Adviser may enter into subadvisory agreements with one or more 

investment advisers each of which will 

serve as a sub-adviser to a Fund (each, 

a ‘‘Sub-Adviser’’). Each Sub-Adviser will 

be registered under the Advisers Act. 

RFS, a Washington corporation and a 

wholly-owned subsidiary of the 

Adviser, is a broker-dealer registered 

under the Securities Exchange Act of 

1934 (the ‘‘Exchange Act’’). ALPS, a 

Colorado corporation, is a broker-dealer 

registered under the Exchange Act. 

ALPS is not affiliated with RIMCo or its 

affiliates. RFS or ALPS will serve as the 

principal underwriter and distributor of 

the Funds (the ‘‘Distributor’’). 

4. Each Fund will hold certain equity 

securities and/or fixed income securities 

(‘‘Portfolio Securities’’) selected to 

correspond generally to the performance 

of a specified equity and/or fixed 

income Underlying Index. Each Initial 

Fund will track an Underlying Index of 

selected equity securities. The Funds 

may invest in equity securities (‘‘Equity 

Funds’’) and/or fixed income securities 

(‘‘Fixed Income Funds’’) traded in the 

U.S. or non-U.S. markets as well as 

futures contracts, options on such 

futures contracts, swaps, forward 

contracts or other derivatives, shares of 

other exchange-traded funds and 

investment companies that invest 

primarily in short-term fixed income 

securities. Certain of the Underlying 

Indexes will be comprised solely of 

equity and/or fixed income securities of 

domestic issuers and non-domestic 

issuers meeting the requirements for 


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3The Calculation Agent will determine the 

number, type and weight of securities that comprise 

each Index and will perform or cause to be 

performed all other calculations that are necessary 

to determine the proper make-up of each Index. The 

Calculation Agent will not disclose any information 

concerning the identity of companies that meet the 

selection criteria to the Adviser, any Sub-Adviser, 

the Funds or any other affiliated entities prior to the 

publication of such information on the Web site. 

Certain employees of the Index Provider and its 

affiliates who have responsibility for the 

Underlying Indexes and Index Composition 

Methodology, as well as those employees of the 

Index Provider and its affiliates appointed to assist 

such employees in the performance of their duties 

(‘‘Index Personnel’’) will monitor the results 

produced by the Calculation Agent on a periodic 

basis. 

4An ‘‘Unaffiliated Index Fund’’ refers to an openend management investment company for which 

the Adviser serves as investment adviser, which 

will operate, function and trade as an exchangetraded fund in substantially the same manner as the 

Initial Funds, and where no entity that creates, 

compiles, sponsors, or maintains an Underlying 

Index is or will be an affiliated person, as defined 

in section 2(a)(3) of the Act, or an affiliated person 

of an affiliated person, of the Fund, the Adviser, the 

Distributor, promoter or any Sub-Adviser to a Fund. 

5Applicants represent that each Fund will invest 

at least 80% of its assets (exclusive of collateral 

held from securities lending) in the component 

securities that comprise its Underlying Index 

(‘‘Component Securities’’) or, in the case of Fixed 

Income Funds, in the Component Securities of its 

respective Underlying Index and TBAs (as defined 

below) representing Component Securities, and in 

the case of Foreign Funds, in Component Securities 

and Depositary Receipts representing such 

Component Securities. Depositary receipts include 

American Depositary Receipts (‘‘ADRs’’) and Global 

Depositary Receipts (‘‘GDRs’’). A Fund will not 

invest in any Depositary Receipts that the Adviser 

or any Sub-Adviser deems to be illiquid or for 

which pricing information is not readily available. 

No affiliated persons of Applicants will serve as the 

depositary for any Depositary Receipts held by a 

Fund. Each Fund also may invest up to 20% of its 

assets in certain index futures, options, options on 

index futures, swap contracts or other derivatives, 

as related to its respective Underlying Index and its 

Component Securities, cash, cash equivalents, other 

investment companies, and securities that are not 

included in its Underlying Index but which the 

Adviser believes will help the Fund track its 

Underlying Index. 

trading in U.S. markets (‘‘Domestic 

Indexes’’). Other Underlying Indexes 

will be comprised solely of foreign 

equity and/or fixed income securities or 

a combination of domestic and foreign 

equity and/or fixed income securities 

(‘‘Foreign Indexes’’). Funds that track 

Domestic Indexes are referred to as 

‘‘Domestic Funds’’ and Funds that track 

Foreign Indexes are referred to as 

‘‘Foreign Funds.’’ The Underlying 

Indexes are based on a proprietary, rules 

based methodology developed by 

Russell (‘‘Index Composition 

Methodology’’). The Index Composition 

Methodology, including the rules which 

govern the inclusion and weighting of 

securities in the Underlying Indexes, 

will be publicly available, including on 

Russell’s website (‘‘Web site’’). All 

components, weightings, additions and 

deletions from the Underlying Indexes 

will not only be publicly available, but 

will also be publicly announced prior to 

any changes being made. While the 

Index Provider may modify the Index 

Composition Methodology in the future, 

it does not currently intend to do so. 

Any change to the Index Composition 

Methodology would not take effect until 

the Index Provider had given the public 

at least 60 days advance notice of the 

change and had given reasonable notice 

of the change to the Calculation Agent. 

The ‘‘Calculation Agent’’ is the entity 

that, pursuant to an agreement with 

Russell, is solely responsible for all 

Index maintenance, calculation, 

dissemination and reconstitution 

activities.3 The Calculation Agent is not, 

and will not be, an affiliated person, or 

an affiliated person of an affiliated 

person, of the Funds, the Adviser, any 

Sub-Adviser, the Distributor or any 

promoter of the Funds. The Indexes will 

be reconstituted on a periodic basis at 

least annually and no more frequently 

than monthly. 

5. Applicants state that the Index 

Personnel will not have any 

responsibility for the management of the 

Funds. In addition, applicants have 

adopted policies and procedures 

(‘‘Firewalls’’) that, among other things, 

are designed to prevent the Adviser, or 

any affiliated person of the Adviser of 

a Fund, from having any advantage over 

other market participants with respect 

to prior knowledge of companies that 

may be added to or deleted from the 

Index or from the portfolios of any 

Funds that track the Underlying 

Indexes. Among other things, the 

Firewalls prohibit anyone, including the 

Index Personnel from disseminating 

non-public information about the 

Indexes, including potential changes to 

the Index Composition Methodology, to, 

among others, the employees of the 

Adviser and any Sub-Adviser 

responsible for managing the Funds or 

any Client Account (as defined below). 

A Client Account is any account, 

including any open-end registered 

investment company, separately 

managed account for institutional 

investors, privately offered fund that is 

not deemed to be an investment 

company in reliance on section 3(c)(1), 

3(c)(7) or 3(c)(11) of the Act, or business 

development company that is a client of 

the Sub-Adviser. The Index Provider, 

the Adviser and any Sub-Adviser have 

or will have adopted policies, including 

Firewalls that prohibit personnel 

responsible for the management of the 

Funds and/or any Client Accounts from 

sharing any non-public information 

about the management of the Funds and 

any Client Account with the Index 

Personnel and Calculation Agent. 

Further, the Adviser and any SubAdviser have adopted and 

implemented, pursuant to rule 206(4)–7 

under the Advisers Act, written policies 

and procedures designed to prevent 

violations of the Advisers Act and the 

rules under the Advisers Act. The 

Adviser, any Sub-Adviser and 

Distributor also have adopted or will 

adopt a Code of Ethics as required under 

rule 17j–1 under the Act, which 

contains provisions reasonably 

necessary to prevent Access Persons (as 

defined in rule 17j–1) from engaging in 

any conduct prohibited in rule 17j–1. In 

addition, the Adviser and any SubAdviser has adopted or will adopt 

policies and procedures to detect and 

prevent insider trading as required 

under section 204A of the Advisers Act, 

which are reasonably designed taking 

into account the nature of their 

business, to prevent the misuse in 

violation of the Advisers Act, Exchange 

Act, or rules and regulations under the 

Advisers Act and Exchange Act, of 

material non-public information. 

6. Applicants assert that certain 

potential conflicts of interest discussed 

in the application do not exist where the 

index creator is not an affiliated person, 

or an affiliated person of an affiliated 

person, of an exchange-traded fund or 

its investment adviser or any subadviser. Applicants assert that the 

representations and undertakings 

designed to prevent such potential 

conflicts of interest that relate to the 

transparency of the methodology for 

those Underlying Indexes, and the 

establishment of certain policies and 

procedures to limit communication 

between Index Personnel and 

employees of the Adviser and any SubAdviser shall not apply to an 

‘‘Unaffiliated Index Fund’’.4

7. The investment objective of each 

Fund will be to provide investment 

results that closely correspond to the 

total return of its Underlying Index.5

The value of the Underlying Index will 

be disseminated once each ‘‘Business 

Day,’’ which is defined as any day that 

a Fund is required to be open under 

section 22(e) of the Act, at the end of the 

Business Day. A Fund will utilize either 

a replication or representative sampling 

strategy to track its Underlying Index. A 

Fund using a replication strategy will 

invest in substantially all of the 

Component Securities in its Underlying 

Index in the same approximate 

proportions as in the Underlying Index. 

A Fund using a representative sampling 

strategy will attempt to match the risk 

and return characteristics of a Fund’s 


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6Each Fund will sell and redeem Creation Units 

only on a Business Day. The Fund will make 

available on each Business Day, prior to the 

opening of trading on the listing Exchange, a list of 

the names and the required number of shares of 

each Deposit Security to be included in the 

Portfolio Deposit for each Fund. Any national 

securities exchange (as defined in section 2(a)(26) 

of the Act) (‘‘Exchange’’) on which Shares are listed 

will disseminate, every 15 seconds during its 

regular trading hours, through the facilities of the 

Consolidated Tape Association, an amount per 

individual Share representing the sum of the 

estimated Balancing Amount and the current value 

of the Deposit Securities. 

7Where a Fund permits a purchaser to substitute 

cash in lieu of depositing a portion of the requisite 

Deposit Securities, the purchaser may be assessed 

a higher Transaction Fee to cover the cost of 

purchasing such Deposit Securities. 

8Shares will be registered in book-entry form 

only. DTC or its nominee will be the registered 

owner of all outstanding Shares. DTC or DTC 

Participants will maintain records reflecting 

beneficial owners of Shares. 

9Applicants state that a cash-in-lieu amount will 

replace any ‘‘to-be-announced’’ (‘‘TBA’’) transaction 

that is listed as a Deposit Security or Redemption 

Security of any Fund. A TBA transaction is a 

method of trading mortgage-backed securities where 

the buyer and seller agree upon general trade 

parameters such as agency, settlement date, par 

amount and price. The actual pools delivered 

generally are determined two days prior to the 

settlement date. The amount of substituted cash in 

the case of TBA transactions will be equivalent to 

the value of the TBA transaction listed as a Deposit 

Security or a Redemption Security. 

10 In accepting Deposit Securities and satisfying 

redemptions with Redemption Securities that are 

restricted securities eligible for resale pursuant to 

rule 144A under the Securities Act, the relevant 

Funds will comply with the conditions of rule 

144A. 

portfolio to the risk and return 

characteristics of its Underlying Index. 

Applicants state that use of the 

representative sampling strategy may 

prevent a Fund from tracking the 

performance of its Underlying Index 

with the same degree of accuracy as 

would a Fund that invests in every 

Component Security of the Underlying 

Index. Applicants expect that each Fund 

will have a tracking error relative to the 

performance of its Underlying Index of 

less than 5%. 

8. Creation Units are expected to 

consist of 50,000 Shares and to have an 

initial price in the range of $1,000,000 

to $30,000,000. All orders to purchase 

Creation Units must be placed with the 

Distributor by or through a party that 

has entered into an agreement with the 

Distributor (‘‘Authorized Participant’’). 

The Distributor will be responsible for 

transmitting the orders to the Funds. An 

Authorized Participant must be either 

(a) a broker-dealer or other participant 

in the continuous net settlement system 

of the National Securities Clearing 

Corporation (‘‘NSCC’’), a clearing agency 

registered with the Commission, or (b) 

a participant in the Depository Trust 

Company (‘‘DTC’’, and such participant, 

‘‘DTC Participant’’). Shares of the Fund 

generally will be sold in Creation Units 

in exchange for an in-kind deposit by 

the purchaser of a portfolio of securities 

designated by the Adviser to correspond 

generally to the total return of the 

relevant Underlying Index (the ‘‘Deposit 

Securities’’), together with the deposit of 

a specified cash payment (‘‘Balancing 

Amount’’ and collectively with the 

Deposit Securities, ‘‘Portfolio Deposit’’). 

The Balancing Amount is an amount 

equal to the difference between (a) the 

net asset value (‘‘NAV’’) (per Creation 

Unit) of a Fund and (b) the total 

aggregate market value (per Creation 

Unit) of the Deposit Securities.6 Each 

Fund may permit a purchaser of 

Creation Units to substitute cash in lieu 

of depositing some or all of the Deposit 

Securities if the method would reduce 

the Fund’s transaction costs or enhance 

the Fund’s operating efficiency. To 

preserve maximum efficiency and 

flexibility, a Fund reserves the right to 

accept and deliver Creation Units on a 

cash basis. 

9. An investor acquiring or redeeming 

a Creation Unit from a Fund will be 

charged a fee (‘‘Transaction Fee’’) to 

prevent the dilution of the interests of 

the remaining shareholders resulting 

from costs in connection with the 

purchase or redemption of Creation 

Units.7 The Distributor also will be 

responsible for delivering the Fund’s 

prospectus to those persons acquiring 

Shares in Creation Units and for 

maintaining records of both the orders 

placed with it and the confirmations of 

acceptance furnished by it. In addition, 

the Distributor will maintain a record of 

the instructions given to the applicable 

Fund to implement the delivery of its 

Shares. 

10. Purchasers of Shares in Creation 

Units may hold such Shares or may sell 

such Shares into the secondary market. 

Shares will be listed and traded on an 

Exchange. It is expected that one or 

more member firms of an Exchange will 

be designated to act as a market maker 

(each, a ‘‘Market Maker’’) and maintain 

a market for Shares trading on the 

Exchange. Prices of Shares trading on an 

Exchange will be based on the current 

bid/offer market. Shares sold in the 

secondary market will be subject to 

customary brokerage commissions and 

charges. 

11. Applicants expect that purchasers 

of Creation Units will include 

institutional investors and arbitrageurs 

(which could include institutional 

investors). Exchange specialists also 

may purchase Creation Units for use in 

market-making activities. Applicants 

expect that secondary market 

purchasers of Shares will include both 

institutional investors and retail 

investors.8 Applicants expect that the 

price at which Shares trade will be 

disciplined by arbitrage opportunities 

created by the option to continually 

purchase or redeem Creation Units at 

their NAV, which should ensure that 

Shares will not trade at a material 

discount or premium in relation to their 

NAV. 

12. Shares will not be individually 

redeemable, and owners of Shares may 

acquire those Shares from the Fund, or 

tender such Shares for redemption to 

the Fund, in Creation Units only. To 

redeem, an investor will have to 

accumulate enough Shares to constitute 

a Creation Unit. Redemption orders 

must be placed by or through an 

Authorized Participant. An investor 

redeeming a Creation Unit generally 

will receive (a) Portfolio Securities 

designated to be delivered for 

redemptions (‘‘Redemption Securities’’) 

on the date that the request for 

redemption is submitted and (b) a ‘‘Cash 

Redemption Payment,’’ consisting of an 

amount calculated in the same manner 

as the Balancing Amount, although the 

actual amount of the Cash Redemption 

Payment may differ if the Redemption 

Securities are not identical to the 

Deposit Securities on that day. An 

investor may receive the cash equivalent 

of a Redemption Security in certain 

circumstances, such as if the investor is 

restrained from effecting transactions in 

the security by regulation or policy.9 A 

redeeming investor may pay a 

Transaction Fee, calculated in the same 

manner as a Transaction Fee payable in 

connection with purchases of Creation 

Units. 

13. Applicants state that in accepting 

Deposit Securities and satisfying 

redemptions with Redemption 

Securities, the relevant Funds will 

comply with the federal securities laws, 

including that the Deposit Securities 

and Redemption Securities are sold in 

transactions that would be exempt from 

registration under the Securities Act of 

1933 (‘‘Securities Act’’).10 The specified 

Deposit Securities and Redemption 

Securities either (a) will correspond pro 

rata to the Portfolio Securities of a Fund, 

or (b) will not correspond pro rata to the 

Portfolio Securities, provided that the 

Deposit Securities and Redemption 

Securities (i) consist of the same 

representative sample of Portfolio 

Securities designed to generate 

performance that is highly correlated to 

the performance of the Portfolio 

Securities, (ii) consist only of securities 

that are already included among the 

existing Portfolio Securities, and (iii) are 


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11 In either case, a basket of Deposit Securities 

and a basket of Redemption Securities (and a true 

pro rata slice of the Portfolio Securities) may differ 

solely to the extent necessary (a) because it is 

impossible to break up bonds beyond certain 

minimum sizes needed for transfer and settlement, 

(b) because, in the case of equity securities, 

rounding is necessary to eliminate fractional shares 

or lots that are not tradeable round lots, or (c) for 

temporary periods, to effect changes in the Portfolio 

Securities as a result of the rebalancing of an 

Underlying Index. A tradeable round lot for an 

equity security will be the standard unit of trading 

in that particular type of security in its primary 

market. 

the same for all Authorized Participants 

on a given Business Day.11

14. Neither the Trust nor any 

individual Fund will be marketed or 

otherwise held out as a traditional openend investment company or a mutual 

fund. Instead, each Fund will be 

marketed as an ‘‘ETF,’’ an ‘‘investment 

company,’’ a ‘‘fund,’’ or a ‘‘trust.’’ All 

marketing materials that describe the 

features or method of obtaining, buying 

or selling Creation Units or Shares 

traded on an Exchange, or refer to 

redeemability, will prominently 

disclose that Shares are not individually 

redeemable and that the owners of 

Shares may purchase or redeem Shares 

from the Fund in Creation Units only. 

The same approach will be followed in 

investor educational materials issued or 

circulated in connection with the 

Shares. The Funds will provide copies 

of their annual and semi-annual 

shareholder reports to DTC Participants 

for distribution to shareholders. 

Applicants’ Legal Analysis: 

1. Applicants request an order under 

section 6(c) of the Act for an exemption 

from sections 2(a)(32), 5(a)(1), 22(d), and 

22(e) of the Act and rule 22c–1 under 

the Act, under sections 6(c) and 17(b) of 

the Act for an exemption from sections 

17(a)(1) and 17(a)(2) of the Act, and 

under section 12(d)(1)(J) of the Act for 

an exemption from sections 12(d)(1)(A) 

and 12(d)(1)(B) of the Act. 

2. Section 6(c) of the Act provides that 

the Commission may exempt any 

person, security or transaction, or any 

class of persons, securities or 

transactions, from any provision of the 

Act, if and to the extent that such 

exemption is necessary or appropriate 

in the public interest and consistent 

with the protection of investors and the 

purposes fairly intended by the policy 

and provisions of the Act. Section 17(b) 

of the Act authorizes the Commission to 

exempt a proposed transaction from 

section 17(a) of the Act if evidence 

establishes that the terms of the 

transaction, including the consideration 

to be paid or received, are reasonable 

and fair and do not involve 

overreaching on the part of any person 

concerned, and the proposed 

transaction is consistent with the 

policies of the registered investment 

company and the general provisions of 

the Act. Section 12(d)(1)(J) of the Act 

provides that the Commission may 

exempt any person, security, or 

transaction, or any class or classes of 

persons, securities or transactions, from 

any provisions of section 12(d)(1) if the 

exemption is consistent with the public 

interest and the protection of investors. 

Sections 5(a)(1) and 2(a)(32) of the Act 

3. Section 5(a)(1) of the Act defines an 

‘‘open-end company’’ as a management 

investment company that is offering for 

sale or has outstanding any redeemable 

security of which it is the issuer. 

Section 2(a)(32) of the Act defines a 

redeemable security as any security, 

other than short-term paper, under the 

terms of which the owner, upon its 

presentation to the issuer, is entitled to 

receive approximately his proportionate 

share of the issuer’s current net assets, 

or the cash equivalent. Because Shares 

will not be individually redeemable, 

applicants request an order that would 

permit the Funds to register as open-end 

management investment companies and 

issue Shares that are redeemable in 

Creation Units only. Applicants state 

that investors may purchase Shares in 

Creation Units and redeem Creation 

Units from each Fund. Applicants state 

that because Creation Units may always 

be purchased and redeemed at NAV, the 

market price of the Shares should not 

vary substantially from their NAV. 

Section 22(d) of the Act and Rule 22c– 

1 Under the Act 

4. Section 22(d) of the Act, among 

other things, prohibits a dealer from 

selling a redeemable security, which is 

currently being offered to the public by 

or through a principal underwriter, 

except at a current public offering price 

described in the prospectus. Rule 22c– 

1 under the Act generally requires that 

a dealer selling, redeeming or 

repurchasing a redeemable security do 

so only at a price based on its NAV. 

Applicants state that secondary market 

trading in Shares will take place at 

negotiated prices, not at a current 

offering price described in a Fund’s 

prospectus, and not at a price based on 

NAV. Thus, purchases and sales of 

Shares in the secondary market will not 

comply with section 22(d) of the Act 

and rule 22c–1 under the Act. 

Applicants request an exemption under 

section 6(c) from these provisions. 

5. Applicants assert that the concerns 

sought to be addressed by section 22(d) 

of the Act and rule 22c–1 under the Act 

with respect to pricing are equally 

satisfied by the proposed method of 

pricing Shares. Applicants maintain that 

while there is little legislative history 

regarding section 22(d), its provisions, 

as well as those of rule 22c–1, appear to 

have been designed to (a) prevent 

dilution caused by certain riskless 

trading schemes by principal 

underwriters and contract dealers, (b) 

prevent unjust discrimination or 

preferential treatment among buyers, 

and (c) ensure an orderly distribution of 

investment company shares by 

eliminating price competition from 

dealers offering shares at less than the 

published sales price and repurchasing 

shares at more than the published 

redemption price. 

6. Applicants believe that none of 

these purposes will be thwarted by 

permitting Shares to trade in the 

secondary market at negotiated prices. 

Applicants state that (a) secondary 

market trading in Shares does not 

involve a Fund as a party and will not 

result in dilution of an investment in 

Shares, and (b) to the extent different 

prices exist during a given trading day, 

or from day to day, such variances occur 

as a result of third party market forces, 

such as supply and demand. Therefore, 

applicants assert that secondary market 

transactions in Shares will not lead to 

discrimination or preferential treatment 

among purchasers. Finally, applicants 

contend that the proposed distribution 

system will be orderly because 

competitive forces will ensure that the 

difference between the market price of 

Shares and their NAV remains narrow. 

Section 22(e) 

7. Section 22(e) of the Act generally 

prohibits a registered investment 

company from suspending the right of 

redemption or postponing the date of 

payment of redemption proceeds for 

more than seven days after the tender of 

a security for redemption. Applicants 

observe that the settlement of 

redemptions of Creation Units of the 

Foreign Funds is contingent not only on 

the settlement cycle of the U.S. 

securities markets, but also on the 

delivery cycles present in local markets 

for the foreign securities in which those 

Funds invest. Applicants have been 

advised that, under certain 

circumstances, the delivery cycles for 

transferring Portfolio Securities to 

redeeming investors, coupled with local 

market holiday schedules, will require a 

delivery process of up to 14 calendar 

days. Applicants therefore request relief 

from section 22(e) in order to provide 

for payment or satisfaction of 

redemptions within the maximum 

number of calendar days required for 

such payment or satisfaction in the 

principal local markets where 


srobinson on DSKHWCL6B1PROD with NOTICES
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12Applicants acknowledge that no relief obtained 

from the requirements of section 22(e) will affect 

any obligations applicants may have under rule 

15c6–1 under the Exchange Act. Rule 15c6–1 

requires that most securities transactions be settled 

within three business days of the trade. 

13The term ‘‘Actively-Managed Funds’’ as used in 

the application refers to exchange-traded funds that 

utilize active management investment strategies, are 

advised by an Adviser and in the same ‘‘group of 

investment companies’’ within the meaning of 

section 12(d)(1)(G)(ii) of the Act, as the Funds. 

14A ‘‘Fund of Funds Affiliate’’ is any Fund of 

Funds Adviser, Fund of Funds Sub-Adviser, 

Sponsor, promoter, or principal underwriter of a 

Fund of Funds, and any person controlling, 

controlled by, or under common control with any 

of those entities. A ‘‘Fund Affiliate’’ is the 

investment adviser, promoter, or principal 

underwriter of a Fund or Actively-Managed Fund 

and any person controlling, controlled by or under 

common control with any of those entities. 

transactions in the Portfolio Securities 

of each Foreign Fund customarily clear 

and settle, but in all cases no later than 

14 calendar days following the tender of 

a Creation Unit.12 With respect to 

Future Funds that are Foreign Funds, 

applicants seek the same relief from 

section 22(e) only to the extent that 

circumstances exist similar to those 

described in the application. 

8. Applicants submit that section 

22(e) was designed to prevent 

unreasonable, undisclosed and 

unforeseen delays in the actual payment 

of redemption proceeds. Applicants 

state that allowing redemption 

payments for Creation Units of a Fund 

to be made within the number of days 

indicated above up to a maximum of 14 

calendar days would not be inconsistent 

with the spirit and intent of section 

22(e). Applicants state that the 

Statement of Additional Information 

(‘‘SAI’’) will disclose those local 

holidays (over the period of at least one 

year following the date of the SAI), if 

any, that are expected to prevent the 

delivery of redemption proceeds in 

seven calendar days, and the maximum 

number of days, up to a maximum of 14 

calendar days, needed to deliver the 

proceeds for each affected Foreign 

Fund. Applicants are not seeking relief 

from section 22(e) with respect to 

Foreign Funds that do not effect 

creations and redemptions of Creation 

Units in-kind. 

Section 12(d)(1) 

9. Section 12(d)(1)(A) of the Act, in 

relevant part, prohibits a registered 

investment company from acquiring 

securities of an investment company if 

such securities represent more than 3% 

of the total outstanding voting stock of 

the acquired company, more than 5% of 

the total assets of the acquiring 

company, or, together with the 

securities of any other investment 

companies, more than 10% of the total 

assets of the acquiring company. Section 

12(d)(1)(B) of the Act prohibits a 

registered open-end investment 

company, its principal underwriter and 

any other broker-dealer from selling the 

investment company’s shares to another 

investment company if the sale will 

cause the acquiring company to own 

more than 3% of the acquired 

company’s voting stock, or if the sale 

will cause more than 10% of the 

acquired company’s voting stock to be 

owned by investment companies 

generally. 

10. Applicants request an exemption 

to permit management investment 

companies (‘‘Investing Management 

Companies’’) and unit investment trusts 

(‘‘Investing Trusts’’) registered under the 

Act that are not sponsored or advised by 

the Adviser or any entity controlling, 

controlled by, or under common control 

with the Adviser and are not part of the 

same ‘‘group of investment companies,’’ 

as defined in section 12(d)(1)(G)(ii) of 

the Act, as the Funds or ActivelyManaged Funds 13 (collectively, ‘‘Fund 

of Funds’’) to acquire Shares or shares of 

an Actively-Managed Fund beyond the 

limits of section 12(d)(1)(A). In addition, 

applicants seek relief to permit a Fund 

or Actively-Managed Fund and any 

principal underwriter for the Fund or 

Actively-Managed Fund, and any 

broker-dealer that is registered under 

the Exchange Act (‘‘Broker’’) to sell 

Shares or shares, respectively, to Fund 

of Funds in excess of the limits of 

section 12(d)(1)(B). 

11. Each Investing Management 

Company will be advised by an 

investment adviser within the meaning 

of section 2(a)(20)(A) of the Act (the 

‘‘Fund of Funds Adviser’’) and may be 

sub-advised by one or more investment 

advisers within the meaning of section 

2(a)(20)(B) of the Act (each a ‘‘Fund of 

Funds Sub-Adviser’’). Any investment 

adviser to a Fund of Funds will be 

registered under the Advisers Act. Each 

Investing Trust will be sponsored by a 

sponsor (‘‘Sponsor’’). 

12. Applicants submit that the 

proposed conditions to the requested 

relief adequately address the concerns 

underlying the limits in section 

12(d)(1)(A) and (B), which include 

concerns about undue influence by a 

fund of funds over underlying funds, 

excessive layering of fees and overly 

complex fund structures. Applicants 

believe that the requested exemption is 

consistent with the public interest and 

the protection of investors. 

13. Applicants believe that neither the 

Fund of Funds nor a Fund of Funds 

Affiliate would be able to exert undue 

influence over the Funds or ActivelyManaged Funds.14 To limit the control 

that a Funds of Funds may have over a 

Fund or Actively-Managed Fund, 

applicants propose a condition 

prohibiting a Fund of Funds Adviser or 

a Sponsor, any person controlling, 

controlled by, or under common control 

with the Fund of Funds Adviser or 

Sponsor, and any investment company 

or issuer that would be an investment 

company but for section 3(c)(1) or 

3(c)(7) of the Act that is advised or 

sponsored by the Fund of Funds 

Adviser or Sponsor, or any person 

controlling, controlled by, or under 

common control with the Fund of 

Funds Adviser or Sponsor (‘‘Fund of 

Funds’ Advisory Group’’) from 

controlling (individually or in the 

aggregate) a Fund or Actively-Managed 

Fund within the meaning of section 

2(a)(9) of the Act. The same prohibition 

would apply to any Fund of Funds SubAdviser, any person controlling, 

controlled by or under common control 

with the Fund of Funds Sub-Adviser, 

and any investment company or issuer 

that would be an investment company 

but for section 3(c)(1) or 3(c)(7) of the 

Act (or portion of such investment 

company or issuer) advised or 

sponsored by the Fund of Funds SubAdviser or any person controlling, 

controlled by or under common control 

with the Fund of Funds Sub-Adviser 

(‘‘Fund of Funds’ Sub-Advisory Group’’). 

Applicants propose other conditions to 

limit the potential for undue influence 

over the Funds or Actively-Managed 

Funds, including that no Fund of Funds 

or Fund of Funds Affiliate (except to the 

extent it is acting in its capacity as an 

investment adviser to a Fund or 

Actively-Managed Fund) will cause a 

Fund or Actively-Managed Fund to 

purchase a security in an offering of 

securities during the existence of an 

underwriting or selling syndicate of 

which a principal underwriter is an 

Underwriting Affiliate (‘‘Affiliated 

Underwriting’’). An ‘‘Underwriting 

Affiliate’’ is a principal underwriter in 

any underwriting or selling syndicate 

that is an officer, director, member of an 

advisory board, Fund of Funds Adviser, 

Fund of Funds Sub-Adviser, Sponsor, or 

employee of the Fund of Funds, or a 

person of which any such officer, 

director, member of an advisory board, 

Fund of Funds Adviser, Fund of Funds 

Sub-Adviser, Sponsor, or employee is 

an affiliated person (except that any 

person whose relationship to the Fund 

or Actively-Managed Fund is covered by 


srobinson on DSKHWCL6B1PROD with NOTICES
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15Any references to NASD Conduct Rule 2830 

include any successor or replacement rule to NASD 

Conduct Rule 2830 that may be adopted by FINRA. 

16To the extent that purchases and sales of Shares 

of a Fund occur in the secondary market (and not 

through principal transactions directly between a 

Fund of Funds and a Fund or Actively-Managed 

Fund), relief from section 17(a) would not be 

necessary. However, the requested relief would 

apply to in-kind transactions directly between 

Funds or Actively-Managed Funds and Funds of 

Funds. Applicants are not seeking relief from 

section 17(a) for, and the requested relief will not 

apply to, transactions where a Fund or ActivelyManaged Fund could be deemed an affiliated 

person, or an affiliated person of an affiliated 

person, of a Fund of Funds because an investment 

adviser to the Fund or Actively-Managed Fund is 

also an investment adviser to the Fund of Funds. 

section 10(f) of the Act is not an 

Underwriting Affiliate). 

14. Applicants assert that the 

proposed conditions address any 

concerns regarding excessive layering of 

fees. The board of directors or trustees 

of any Investing Management Company, 

including a majority of the directors or 

trustees who are not ‘‘interested 

persons’’ within the meaning of section 

2(a)(19) of the Act, will find that the 

advisory fees charged to the Investing 

Management Company are based on 

services provided that will be in 

addition to, rather than duplicative of, 

services provided under the advisory 

contract(s) of any Fund or ActivelyManaged Fund in which the Investing 

Management Company may invest. In 

addition, except as provided in 

condition B.6, a Fund of Funds Adviser 

or a trustee (‘‘Trustee’’) or Sponsor of an 

Investing Trust will, as applicable, 

waive fees otherwise payable to it by the 

Fund of Funds in an amount at least 

equal to any compensation (including 

fees received pursuant to any plan 

adopted by a Fund or Actively-Managed 

Fund under rule 12b–1 under the Act) 

received by the Fund of Funds Adviser, 

Trustee or Sponsor or an affiliated 

person of the Fund of Funds Adviser, 

Trustee or Sponsor, from a Fund or 

Actively-Managed Fund in connection 

with the investment by the Fund of 

Funds in the Fund or Actively-Managed 

Fund. Applicants state that any sales 

charges or service fees charged with 

respect to shares of a Fund of Funds 

will not exceed the limits applicable to 

a fund of funds set forth in NASD 

Conduct Rule 2830.15

15. Applicants submit that the 

proposed arrangement will not create an 

overly complex fund structure. 

Applicants note that no Fund or 

Actively-Managed Fund may acquire 

securities of any investment company or 

company relying on section 3(c)(1) or 

3(c)(7) of the Act in excess of the limits 

contained in section 12(d)(1)(A) of the 

Act, except to the extent permitted by 

exemptive relief from the Commission 

permitting the Fund or ActivelyManaged Fund to purchase shares of 

other investment companies for shortterm cash management purposes. To 

ensure that Funds of Funds comply 

with the terms and conditions of the 

requested relief from section 12(d)(1), 

any Fund of Funds that intends to 

invest in a Fund or Actively-Managed 

Fund in reliance on the requested order 

will enter into an agreement (‘‘FOF 

Participation Agreement’’) between the 

Fund or Actively-Managed Fund and 

the Fund of Funds requiring the Fund 

of Funds to adhere to the terms and 

conditions of the requested order. The 

FOF Participation Agreement also will 

include an acknowledgement from the 

Fund of Funds that it may rely on the 

requested order only to invest in a Fund 

or an Actively-Managed Fund and not 

in any other investment company. 

16. Applicants also note that a Fund 

or an Actively-Managed Fund may 

choose to reject a direct purchase of 

Shares in Creation Units by a Fund of 

Funds. To the extent that a Fund of 

Funds purchases Shares or shares of an 

Actively-Managed Fund in the 

secondary market, a Fund or ActivelyManaged Fund would still retain its 

ability to reject initial purchases of 

Shares or shares, as the case may be, 

made in reliance on the requested order 

by declining to enter into the FOF 

Participation Agreement prior to any 

investment by a Fund of Funds in 

excess of the limits of section 

12(d)(1)(A). 

Sections 17(a)(1) and (2) of the Act 

17. Section 17(a) of the Act generally 

prohibits an affiliated person of a 

registered investment company, or an 

affiliated person of such a person 

(‘‘Second-Tier Affiliate’’), from selling 

any security to or acquiring any security 

from the company. Section 2(a)(3) of the 

Act defines ‘‘affiliated person’’ to 

include (a) any person directly or 

indirectly owning, controlling or 

holding with power to vote 5% or more 

of the outstanding voting securities of 

the other person, (b) any person 5% or 

more of whose outstanding voting 

securities are directly or indirectly 

owned, controlled or held with the 

power to vote by the other person, and 

(c) any person directly or indirectly 

controlling, controlled by or under 

common control with the other person. 

Section 2(a)(9) of the Act provides that 

a control relationship will be presumed 

where one person owns more than 25% 

of another person’s voting securities. 

The Funds may be deemed to be 

controlled by the Adviser or an entity 

controlling, controlled by or under 

common control with the Adviser and 

hence affiliated persons of each other. In 

addition, the Funds may be deemed to 

be under common control with any 

other registered investment company (or 

series thereof) advised by the Adviser or 

an entity controlling, controlled by or 

under common control with the Adviser 

(an ‘‘Affiliated Fund’’). 

18. Applicants request an exemption 

from section 17(a) of the Act pursuant 

to sections 17(b) and 6(c) of the Act to 

permit persons to effectuate in-kind 

purchases and redemptions with a Fund 

when they are affiliated persons of the 

Fund or Second-Tier Affiliates solely by 

virtue of one or more of the following: 

(a) Holding 5% or more, or in excess of 

25%, of the outstanding Shares of one 

or more Funds; (b) having an affiliation 

with a person with an ownership 

interest described in (a); or (c) holding 

5% or more, or more than 25%, of the 

shares of one or more Affiliated Funds. 

19. Applicants assert that no useful 

purpose would be served by prohibiting 

these types of affiliated persons from 

acquiring or redeeming Creation Units 

through ‘‘in-kind’’ transactions. The 

deposit procedures for both in kind 

purchases and in-kind redemptions of 

Creation Units will be the same for all 

purchases and redemptions. Deposit 

Securities and Redemption Securities 

will be valued in the same manner as 

Portfolio Securities. Portfolio Securities, 

Deposit Securities, Redemption 

Securities, and Cash Redemption 

Payments (except for any permitted 

cash-in-lieu amounts) will be the same 

regardless of the identity of the 

purchaser or redeemer, except for the 

previously mentioned temporary 

periods where the Redemption and 

Creation Units differ to reflect changes 

in the Underlying Index. Therefore, 

applicants state that in-kind purchases 

and redemptions will afford no 

opportunity for the specified affiliated 

persons, or Second-Tier Affiliates, of a 

Fund to effect a transaction detrimental 

to other holders of Shares. Applicants 

also believe that in-kind purchases and 

redemptions will not result in selfdealing or overreaching of the Fund. 

20. Applicants also seek relief from 

section 17(a) to permit a Fund or 

Actively-Managed Fund that is an 

affiliated person, or affiliated person of 

an affiliated person of a Fund of Funds 

to sell its Shares, or shares in the case 

of an Actively-Managed Fund, to and 

redeem its Shares, or shares, from a 

Fund of Funds, and to engage in the 

accompanying in-kind transactions with 

the Fund of Funds.16 Applicants state 

that the terms of the transactions are fair 

and reasonable and do not involve 


srobinson on DSKHWCL6B1PROD with NOTICES
23348 Federal Register / Vol. 76, No. 80 / Tuesday, April 26, 2011 / Notices 

17Applicants acknowledge that receipt of 

compensation by (a) an affiliated person of a Fund 

of Funds, or an affiliated person of such person, for 

the purchase by the Fund of Funds of Shares or 

shares of an Actively-Managed Fund, or (b) an 

affiliated person of a Fund or an Actively-Managed 

Fund, or an affiliated person of such person, for the 

sale by the Fund of its Shares, or Actively-Managed 

Fund of its shares, to a Fund of Funds may be 

prohibited by section 17(e)(1) of the Act. The FOF 

Participation Agreement also will include this 

acknowledgment. 

overreaching. Applicants note that any 

consideration paid by a Fund of Funds 

for the purchase or redemption of 

Shares directly from a Fund, or of shares 

directly from an Actively-Managed 

Fund, will be based on the NAV of the 

Fund or Actively-Managed Fund.17

Applicants believe that any proposed 

transactions directly between the Funds 

or Actively-Managed Funds and Fund of 

Funds will be consistent with the 

policies of each Fund of Funds. Any 

investment by a Fund of Funds in 

Shares of Funds or shares of ActivelyManaged Funds will be accomplished in 

accordance with the investment 

restrictions of any such Fund of Funds 

and will be consistent with the 

investment policies set forth in the 

Fund of Fund’s registration statement. 

The FOF Participation Agreement will 

require any Fund of Funds that 

purchases Creation Units directly from 

a Fund or Actively-Managed Fund to 

represent that the purchase of Creation 

Units from a Fund or Actively-Managed 

Fund by a Fund of Funds will be 

accomplished in compliance with the 

investment restrictions of the Fund of 

Funds and will be consistent with the 

investment policies set forth in the 

Fund of Fund’s registration statement. 

Applicants’ Conditions: 

Applicants agree that any order of the 

Commission granting the requested 

relief will be subject to the following 

conditions: 

A. Exchange Traded Fund Relief 

1. As long as a Fund operates in 

reliance on the requested order, the 

Shares of such Fund will be listed on an 

Exchange. 

2. No Fund will be advertised or 

marketed as an open-end investment 

company or a mutual fund. Any 

advertising material that describes the 

purchase or sale of Creation Units or 

refers to redeemability will prominently 

disclose that Shares are not individually 

redeemable and that owners of Shares 

may acquire those Shares from the Fund 

and tender those Shares for redemption 

to the Fund in Creation Units only. 

3. The Web site for each Fund, which 

is and will be publicly accessible at no 

charge, will contain the prior Business 

Day’s NAV and the market closing price 

or the midpoint of the bid/ask spread at 

the time of the calculation of such NAV 

(‘‘Bid/Ask Price’’), and a calculation of 

the premium or discount of the market 

closing price or Bid/Ask Price in 

relation to the NAV, on a per Share 

basis, for each Fund. 

4. The requested relief to permit ETF 

operations will expire on the effective 

date of any Commission rule under the 

Act that provides relief permitting the 

operation of index-based exchange 

traded funds. 

B. Section 12(d)(1) Relief 

1. The members of a Fund of Funds’ 

Advisory Group will not control 

(individually or in the aggregate) any 

Fund or Actively-Managed Fund within 

the meaning of section 2(a)(9) of the Act. 

The members of a Fund of Funds’ SubAdvisory Group will not control 

(individually or in the aggregate) any 

Fund or Actively-Managed Fund within 

the meaning of section 2(a)(9) of the Act. 

If, as a result of a decrease in the 

outstanding voting securities of a Fund 

or Actively-Managed Fund, a Fund of 

Funds’ Advisory Group or a Fund of 

Funds’ Sub-Advisory Group, each in the 

aggregate, becomes a holder of more 

than 25% of the outstanding voting 

securities of a Fund or ActivelyManaged Fund, it will vote its Shares of 

the Fund or Actively-Managed Fund, as 

the case may be, in the same proportion 

as the vote of all other holders of such 

shares. This condition does not apply to 

a Fund of Funds’ Sub-Advisory Group 

with respect to a Fund or ActivelyManaged Fund for which the Fund of 

Funds Sub-Adviser or a person 

controlling, controlled by or under 

common control with the Fund of 

Funds Sub-Adviser acts as the 

investment adviser within the meaning 

of section 2(a)(20)(A) of the Act. 

2. No Fund of Funds or Fund of 

Funds Affiliate will cause any existing 

or potential investment by the Fund of 

Funds in a Fund or an ActivelyManaged Fund to influence the terms of 

any services or transactions between the 

Fund of Funds or a Fund of Funds 

Affiliate and the Fund or its Fund 

Affiliate or the Actively-Managed Fund 

or its Fund Affiliate, as the case may be. 

3. The board of directors or trustees of 

an Investing Management Company, 

including a majority of the noninterested directors or trustees, will 

adopt procedures reasonably designed 

to ensure that the Fund of Funds 

Adviser and any Fund of Funds SubAdviser are conducting the investment 

program of the Investing Management 

Company without taking into account 

any consideration received by the 

Investing Management Company or a 

Fund of Funds Affiliate from a Fund or 

its Fund Affiliate or an ActivelyManaged Fund or its Fund Affiliate, as 

the case may be, in connection with any 

services or transactions. 

4. No Fund of Funds or Fund of 

Funds Affiliate (except to the extent it 

is acting in its capacity as an investment 

adviser to a Fund or an ActivelyManaged Fund) will cause a Fund or an 

Actively-Managed Fund to purchase a 

security in an Affiliated Underwriting. 

5. Before investing in a Fund or an 

Actively-Managed Fund in excess of the 

limits in section 12(d)(1)(A), the Fund of 

Funds and the Fund or ActivelyManaged Fund, as the case may be, will 

execute a FOF Participation Agreement 

stating, without limitation, that their 

boards of directors or trustees and their 

investment advisers, or Trustee and 

Sponsor, as applicable, understand the 

terms and conditions of the order, and 

agree to fulfill their responsibilities 

under the order. At the time of its 

investment in Shares of a Fund or 

shares of an Actively-Managed Fund in 

excess of the limit in section 

12(d)(1)(A)(i), a Fund of Funds will 

notify the Fund or the ActivelyManaged Fund of the investment. At 

such time, the Fund of Funds will also 

transmit to the Fund or the ActivelyManaged Fund, as the case may be, a list 

of the names of each Fund of Funds 

Affiliate and Underwriting Affiliate. The 

Fund of Funds will notify the Fund or 

the Actively-Managed Fund of any 

changes to the list of the names as soon 

as reasonably practicable after a change 

occurs. The Fund or the ActivelyManaged Fund and the Fund of Funds 

will maintain and preserve a copy of the 

order, the FOF Participation Agreement, 

and the list with any updated 

information for the duration of the 

investment and for a period of not less 

than six years thereafter, the first two 

years in an easily accessible place. 

6. The Fund of Funds Adviser, 

Trustee or Sponsor, as applicable, will 

waive fees otherwise payable to it by the 

Fund of Funds in an amount at least 

equal to any compensation (including 

fees received pursuant to any plan 

adopted by a Fund or an ActivelyManaged Fund under rule 12b–1 under 

the Act) received from a Fund or an 

Actively-Managed Fund by the Fund of 

Funds Adviser, Trustee or Sponsor, or 

an affiliated person of the Fund of 

Funds Adviser, Trustee or Sponsor, 

other than any advisory fees paid to the 

Fund of Funds Adviser, Trustee or 

Sponsor, or its affiliated person by the 

Fund or the Actively-Managed Fund, in 

connection with the investment by the 

Fund of Funds in the Fund or ActivelyManaged Fund. Any Fund of Funds 


srobinson on DSKHWCL6B1PROD with NOTICES
Federal Register / Vol. 76, No. 80 / Tuesday, April 26, 2011 / Notices 23349 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

Sub-Adviser will waive fees otherwise 

payable to the Fund of Funds SubAdviser, directly or indirectly, by the 

Investing Management Company in an 

amount at least equal to any 

compensation received from a Fund or 

an Actively-Managed Fund by the Fund 

of Funds Sub-Adviser, or an affiliated 

person of the Fund of Funds SubAdviser, other than any advisory fees 

paid to the Fund of Funds Sub-Adviser 

or its affiliated person by the Fund or 

the Actively-Managed Fund, as the case 

may be, in connection with the 

investment by the Investing 

Management Company in the Fund or 

Actively-Managed Fund, as the case 

may be, made at the direction of the 

Fund of Funds Sub-Adviser. In the 

event that the Fund of Funds SubAdviser waives fees, the benefit of the 

waiver will be passed through to the 

Investing Management Company. 

7. Any sales charges and/or service 

fees charged with respect to shares of a 

Fund of Funds will not exceed the 

limits applicable to a fund of funds as 

set forth in NASD Conduct Rule 2830. 

8. Once an investment by a Fund of 

Funds in the securities of a Fund or an 

Actively-Managed Fund exceeds the 

limit in section 12(d)(1)(A)(i) of the Act, 

the board of trustees of the Fund or 

Actively-Managed Fund (‘‘Board’’), 

including a majority of directors or 

trustees who are not ‘‘interested 

persons’’ within the meaning of section 

2(a)(19) of the Act (‘‘non-interested 

Board members’’), will determine that 

any consideration paid by the Fund or 

the Actively-Managed Fund to the Fund 

of Funds or a Fund of Funds Affiliate 

in connection with any services or 

transactions: (i) Is fair and reasonable in 

relation to the nature and quality of the 

services and benefits received by the 

Fund or the Actively-Managed Fund; (ii) 

is within the range of consideration that 

the Fund or the Actively-Managed Fund 

would be required to pay to another 

unaffiliated entity in connection with 

the same services or transactions; and 

(iii) does not involve overreaching on 

the part of any person concerned. This 

condition does not apply with respect to 

any services or transactions between a 

Fund or an Actively-Managed Fund, as 

the case may be, and its investment 

adviser(s), or any person controlling, 

controlled by or under common control 

with such investment adviser(s). 

9. The Board of a Fund and of an 

Actively-Managed Fund, including a 

majority of the non-interested Board 

members, will adopt procedures 

reasonably designed to monitor any 

purchases of securities by the Fund or 

the Actively-Managed Fund, as the case 

may be, in an Affiliated Underwriting, 

once an investment by a Fund of Funds 

in the securities of the Fund or the 

Actively-Managed Fund exceeds the 

limit of section 12(d)(1)(A)(i) of the Act, 

including any purchases made directly 

from an Underwriting Affiliate. The 

Board will review these purchases 

periodically, but no less frequently than 

annually, to determine whether the 

purchases were influenced by the 

investment by the Fund of Funds in the 

Fund or the Actively-Managed Fund. 

The Board will consider, among other 

things: (i) Whether the purchases were 

consistent with the investment 

objectives and policies of the Fund or 

the Actively-Managed Fund, as the case 

may be; (ii) how the performance of 

securities purchased in an Affiliated 

Underwriting compares to the 

performance of comparable securities 

purchased during a comparable period 

of time in underwritings other than 

Affiliated Underwritings or to a 

benchmark such as a comparable market 

index; and (iii) whether the amount of 

securities purchased by the Fund or the 

Actively-Managed Fund, as the case 

may be, in Affiliated Underwritings and 

the amount purchased directly from an 

Underwriting Affiliate have changed 

significantly from prior years. The 

Board will take any appropriate actions 

based on its review, including, if 

appropriate, the institution of 

procedures designed to ensure that 

purchases of securities in Affiliated 

Underwritings are in the best interest of 

shareholders. 

10. Each Fund and each ActivelyManaged Fund will maintain and 

preserve permanently in an easily 

accessible place a written copy of the 

procedures described in the preceding 

condition, and any modifications to 

such procedures, and will maintain and 

preserve for a period of not less than six 

years from the end of the fiscal year in 

which any purchase in an Affiliated 

Underwriting occurred, the first two 

years in an easily accessible place, a 

written record of each purchase of 

securities in Affiliated Underwritings 

once an investment by a Fund of Funds 

in the securities of the Fund or the 

Actively-Managed Fund, as the case 

may be, exceeds the limit of section 

12(d)(1)(A)(i) of the Act, setting forth 

from whom the securities were 

acquired, the identity of the 

underwriting syndicate’s members, the 

terms of the purchase, and the 

information or materials upon which 

the Board’s determinations were made. 

11. Before approving any advisory 

contract under section 15 of the Act, the 

board of directors or trustees of each 

Investing Management Company 

including a majority of the noninterested directors or trustees, will find 

that the advisory fees charged under 

such contract are based on services 

provided that will be in addition to, 

rather than duplicative of, the services 

provided under the advisory contract(s) 

of any Fund or any Actively-Managed 

Fund in which the Investing 

Management Company may invest. 

These findings and their basis will be 

fully recorded in the minute books of 

the appropriate Investing Management 

Company. 

12. No Fund or Actively-Managed 

Fund will acquire securities of an 

investment company or company 

relying on section 3(c)(1) or 3(c)(7) of 

the Act in excess of the limits contained 

in section 12(d)(1)(A) of the Act, except 

to the extent permitted by exemptive 

relief from the Commission permitting 

the Fund or Actively-Managed Fund, as 

the case may be, to purchase shares of 

other investment companies for shortterm cash management purposes. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–9968 Filed 4–25–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64311; File No. SR– 

NASDAQ–2011–052] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Eliminate 

the Expire Time 

April 20, 2011. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on April 14, 

2011, The NASDAQ Stock Market LLC 

(‘‘NASDAQ’’ or the ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by the Exchange. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule change from interested 

persons. 


srobinson on DSKHWCL6B1PROD with NOTICES